The European Commission established the EU High-Level Group on Sustainable Finance (HLEG) to help develop an overarching and comprehensive EU roadmap on sustainable finance. It requested advice on how to ‘steer the flow of capital towards sustainable investments; identify steps that financial institutions and supervisors should take to protect the financial system from sustainability risks; and deploy these policies on a pan-European scale’.
Given the complexity of the financial system and its policy and regulatory framework, there is no single lever to achieve these ambitions and ‘switch’ the financial system to sustainability.
Improving the contribution of the financial system to sustainable and inclusive growth requires a comprehensive review, the identification of areas where changes are needed, and the development of specific recommendations in these areas.
That is what the HLEG has sought to deliver. As priority actions, the HLEG recommends: establishing an EU sustainability taxonomy, starting with climate mitigation, to define areas where investments are needed most; clarifying investor duties to extend the time horizons of investment and bring greater focus on environmental,
social and governance (ESG) factors into investment decisions; upgrading disclosures to make sustainability opportunities and risks transparent; enabling retail investors to invest in sustainable finance opportunities; developing official European sustainability standards for some financial assets, starting with green bonds; establishing ‘Sustainable Infrastructure Europe’ to deploy development capacity in EU member states for infrastructure necessary for a more sustainable economy; and integrating sustainability firmly in the governance of financial institutions as well as in financial supervision